A recent report from the Bank for International Settlements highlights the growing trend of cryptocurrency exchanges offering banking-like services, including lending and yield products, but without providing the same level of protection as traditional financial institutions. The report warns that these services, which are often marketed as high-yield savings products, are in reality unsecured loans to lightly regulated entities. The crypto industry's largest players have evolved into multifaceted intermediaries, bundling services that would typically be separated across banks, brokers, and exchanges.
The rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means to generate passive income on their crypto assets, is a major concern. These products often promise attractive returns but are structured more like unsecured lending than savings, and they lack the stability and safeguards of traditional banking. Users of crypto exchanges often relinquish control and ownership of their digital assets to the platform, which then uses the funds for various activities, with the returns paid to customers being a share of the profits generated. However, these arrangements lack the insurance and transparency of traditional finance, leaving users exposed to the platform's solvency in the event of losses.
The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, highlighting how users are exposed to significant risks. The flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, further underscores the potential for rapid destabilization in these dynamics.